Discuss About Petroliam Nasional Berhad Management Essay

This report is prepared to discuss about Petroliam Nasional Berhad which is known as PETRONAS in terms of company background which includes its core activities that is a major leading in oil and gas industry, its market segments and major events involved as well as its current status. PETRONAS Stakeholders analysis is also discussed in this report by using SWOT analysis in terms of internal and external stakeholders and their contributions to the strengths and weaknesses. A brief descriptions about communications among the stakeholders are mentioned which is related to the company shared value and policies and to improve its conduct business. Any of its possibilities improvements in communication with its stakeholders are also been discuss. The improvements are divided into two sections which are internal and external communications.


Petroliam National Berhad is known as PETRONAS which fully integrated oil and gas corporation. It is ranked among the FORTUNE Global 500’s largest corporation in world and has workforce more than 300,000 and operates in more than 30 countries all over the world. PETRONAS is wholly owned by the Malaysian Government and vested with the entire ownership and control of the petroleum resources in Malaysia and is located in Kuala Lumpur. Their business evolved in a broad spectrum of oil and gas value chain activities such as from their upstream towards the downstream activities. (PETRONAS, 2011), (PETRONAS, 2009), (Kulo, 2009).

1.1.1 Core Activities

According to (PETRONAS, 2011) its core business activities include:

Exploration, development and production of crude oil and natural gas in Malaysia and overseas.

Liquefaction, sale and transportation of Liquefied Natural Gas (LNG).

Processing and transmission of natural gas and sale of natural gas products.

Refining and marketing of petroleum products.

Manufacture and sale of petrochemical products.

Shipping and logistics relating to LNG, crude oil and petroleum products.

1.1.2 Market Segments

Figure : PETRONAS Market Presence (PETRONAS , 2011)

Figure : Summary of Market Presence (PETRONAS , 2011)

According to (PETRONAS, 2011) its market presence are divided by three sections as illustrated in Figure 1 and Figure 2. PETRONAS Exploration and Production (E&P) gains their assets and profits through an effective venture across the exploration, development and product value chain. PETRONAS Cari Gali Sdn.Bhd. (PCSB) works alongside with petroleum multinationals through Production Sharing Contracts to explore, develop and produce oil and gas in Malaysia. PETRONAS continues to build on its E&P portfolio, secure new acreages while undertakes various development projects in overseas.

PETRONAS Gas and Power business aspires to be a leading integrated gas, liquefied natural gas (LNG) and power play. PETRONAS sustain their business production and sales in across Asia Pacific and overseas operation in Far East as well as involve with the energy trading activities in Malaysia and Europe. At presence, PETRONAS commands a sizeable LNG market share in Far East and seize opportunities on the market growth while continuing to grow its LNG presence in Atlantic basin. PETRONAS owns and operates three refineries in Malaysia, two in Melaka and another one in Kertih. (PETRONAS, 2011) suggest that its refining complemented it presence in Africa through 80% subsidiary Engen Petroleum Limited, a leading African refining and marketing company which owns and operates refinery in South Africa. PETRONAS also operates service stations in various international markets includes Indonesia, Thailand, South African and Sudan. PETRONAS Lubricant Sdn.Bhd. (PLI) is the global lubricants manufacturing and marketing arms which presence in more than 20 countries.

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1.1.3 Major Events

Table : Summary of Major Events (PETRONAS, 2012), (PETRONAS, 2009)




PETRONAS downstream business is introduced.


PETRONAS Carigali is introduced for oil exploration and production.


PETRONAS owns and operates three refineries in Malaysia which are located at Melaka and one in Kertih.


Joint venture signed between Malaysian, Japanese and Brazilian companies to include laying extensions of pipelines through Peninsular where gas can be sold to Singapore and Thailand and completed by 1991.


Invite the foreign companies to re-explore the parts of the sea off Sabah and Sarawak and leads to oil exploration by PETRONAS, Petroleum Authority of Thailand and the US Company Triton Oil.

Subsidiary to import, store and distribute LNG begins its operation in Kertih plant.


LPG launched in China and the company acquired a 29.3% interest in Malaysia International Shipping Corporation Bhd (MISC).


Malaysian commercial prototype engine called PETRONAS E01 is introduced.

PETRONAS stake in MISC rise to 62%.


PETRONAS signed with seven new PSCs and secured its stakes in eight exploration blocks in eight countries including Gabon, Cameroon, Niger, Egypt, Yemen, Indonesian and Vietnam.


PETRONAS contributed RM25 Billion to the country’s treasury accounting for 25% of revenue collected via dividends and other revenues.


The venture of acquisition of Woodside Energy Ltd Mauritania brings to success when they discovered oil.


PETRONAS announced a five year deal with major automobile manufacturer, Mercedes marking a new partnership for the company in Formula One


PETRONAS Dagangan launched its new and improved PRIMAX 97 petrol, replacing PRIMAX 3.


PETRONAS’s partnership with Mercedes GP PETRONAS F1 Team reached another significant milestone with the supply of its Fluid Technology Solutions package.

1.1.4 Current Status

It summarize that 27% increase in revenue of RM222.8 billion for the period, up by 27% on the back stronger prices for all products. There is 10% increase in net profit attributable to the shareholders of the company of RM48.9 billion increased by 10% of higher prices and better LNG. During the period, PETRONAS also divested interest in Cairn India Limited and recorded a gain of RM2.6 billion. Their strong overall performance is reflected in the improvement of PETRONAS Return on Average Capital Employed (ROACE) of 22% compared to 18% in Financial Year 2011. As a result, their closing balance of cash, fund and other investments was RM164.3 billion and 5% growth from the balance as at 31st March 2011. (PETRONAS , 2011)

Figure : Revenue by Products (PETRONAS , 2011)

Figure : Revenue by Geographical Trade (PETRONAS , 2011)


Table : SWOT Analysis






Senior Management

Capabilities or Expertise











Customer Feedback

i) Strength: (My Strategic Plan, 2012) suggest that strength refer to competencies that give the organization an advantage in meeting the needs of its target market. Malaysian government is the main financial provider for PETRONAS which gives permission, approval and financial supports to invest in their business. All shareholders play an important role in the organization, because they are the group who make decisions in calculating returns in investing capitals, due to their responsibility and accountability to stakeholders and financial performance compare to a group of senior management who organize, plan and control the company business, management and financial in the company.

ii) Weaknesses: (My Strategic Plan, 2012) suggest weaknesses refers to limitations that company faces in developing or implementing a strategy. Customers often perceive weaknesses that company cannot see. Customers buy the goods e.g. petroleum; therefore the organization must fully understand and meet the needs of their customers, otherwise they fail to make profit or survive in the market. Business needs employees to carry out their business activities. They agree to work with certain, number of hours in return of the wage or salary. Basically, company pay based on individual skills, qualifications, age, location and types of works and industry and other factors too.


iii) Opportunities: (My Strategic Plan, 2012) suggest opportunities refer to favorable condition in the environment that could produce rewards for the organization if acted upon properly. The communities play a great role and give impact for the company future. Generally, company creates a good two ways relationship with the communities to ensure that their product or service get place in their area. In the environmental area, certain information for the specific area should be considered such as the economic and cultural conditions.

iv) Threats: (My Strategic Plan, 2012) suggest threats or barriers may prevent the firms from reaching its objectives. SHELL, PROJECT, BP and ESSO are some of the competitors. These companies have similar products and services and what set apart are the variety of products, services, promotional strategy, product branding and image, company identify and marketing strategies. Currently, PETRONAS has become the major leading in the oil and gas company in Malaysia. Therefore, with government supports, PETRONAS has set its identity at a level which is equal with its major competitors SHELL. Consequently, with such competitions make PETRONAS looks into their marketing strategy in order to rank potential customers. Therefore, a good reputation among the customers is important to maintain supports and positive feedbacks especially for local customers. On the other hands, customer might influence the media too as a result for a good or bad image for an organization.


PETRONAS shared valued can be divided into four types which are (PETRONAS, 2011):

Loyalty – Loyalty to nation and corporation.

Integrity – Honest and Upright.

Professionalism – Committed, innovative, proactive and always striving for excellence.

Cohesiveness – United in purpose and fellowship.

One of the PETRONAS business ethics is to comply with the high ethical standards and to prevent fraud within PETRONAS core values, business principles and various internal policies which reflect the continuous focus on making ethics and anti-corruption. Therefore, PETRONAS introduced the code of ethics to accommodate the development of local and internal laws and customs (PETRONAS, 2011). As a result, a strong ownership develops in relation to comply ethics at all levels.

PETRONAS is more aggressive towards exploration campaign which enhances future prospects of Malaysian sectors. Corporate Governance is the best practice which helps developing strong global orientation and growing expectations of the stakeholders for good corporate citizenship such as enhancement of Code and Ethics and adoption of a whistle blowing policy together with training on competition law. Furthermore, PETRONAS appoint the board of committees which are the Audit Committees which is responsible for the internal controls, risk management and to report financial reports of the company to ensure the quality and reliability of the financial information. The Governance and Risk Committees responsible in assessing the Board’s performances do management review and plan for succession. The Remuneration Committees which assist the Board in discharging its responsibilities in determination and remuneration and compensation of their employees (PETRONAS, 2011).

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Furthermore, employees are strictly required to adhere with the code of conducts in performing their duties and undergo structure training and development programs. This is one of the practices used to measure the employee’s performances and monitor their developments to meet the business requirements. According to (PETRONAS, 2011), Business Continuity Management is introduced where the idea is to provide comprehensive and clear plans and procedures to enhance the group preparedness in managing disasters that may disrupt business operations. The main objective is to reduce impact of crisis and recover towards the long term sustainability of the group operational results to protect their business, partners and customers during crisis or disaster.


Figure : Communication Types

Communication can be divided as illustrated in Figure 5. Communication among the stakeholders is critical for an organization but it is not always easily or effectively done. In internal communications, what the organization does is to determine the goal and objective, according to (PETRONAS, 2011) objective is to contribute the well-being of the people and the nation. Therefore, the organization must ensure employees awareness towards organization’s vision, mission and values and of its key’s organizational developments. All messages should be clearly convey from top to bottom management.

In addition, the management can develop an implementations plan where it is essential to determine individual tasks and responsibilities. For examples, some of communications improvement is to conduct in person communications; to discuss any sensitive issues, staff meeting is very important in organization. Social activities give great impact in the organization culture as any formal meeting. As a result, such events can build team spirit, increase morale and deepen the connection between the staff and the organization. Internal newsletter is an effective ways compare to regular newsletter in such it contains information that is directly relevant to staff. This can be an ideal way to communicate information such as new staff, changes in policies and procedures, updates in programs and company developments. A staff handbook practice is a good idea in conveying company’s mission, vision, objectives, shared values, product and services.

Moreover, for external communications, one way to inform the stakeholders is by using newspaper, magazine, and public service announcement on television or radio may be an appropriate choice. Another test to determine the effectiveness of communication with the stakeholders is by getting their feedback. A conduct research should be conducted with all relevant area in order to determine whether all desire messages have been received together with communication efforts. Conduct research can be in the form of mail, internet or maybe telephone interviews. A telephone interviews maybe the most effective way in reaching the public questions directly. For instance, this method has carried out from most of the telecommunications companies as well as from bank services in Malaysia. Furthermore, PETRONAS shall consider improving or enhancing their company website by adding an attractive menu to educate public from different ages and countries about their products and services. PETROSAINS Museum is a good example for this situation. Therefore, the organization will indirectly educate public, mainly children about oil and gas history with games and activities. Consequently, the main target is communities through website educations. Other than that is, PETRONAS should have good public relations includes ongoing activities that help community to understand and build a strong public image for a collaborative partnership.

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